Italian Economy Minister Giovanni Tria, speaking in a hearing in parliament, said that a crisis of one or more Italian banks must be avoided “in all ways”, adding however that there was no reason to expect one.

FITD, which operates under the Bank of Italy’s supervision, has a mandate to safeguard bank deposits under 100,000 euros in the event of a bank failure.

Setting up a credit line, rather than injecting money into the fund, would allow banks to book the money as a loan, avoiding any direct impact on balance sheets.

Other smaller lenders could come on board later this month, the source added.

Government plans to cut company tax breaks could make any future capital increases more expensive.

Rising risk premiums on Italian assets under an anti-austerity government have also made more expensive a state guarantee scheme devised by Italy’s previous government to help banks shed bad debts through securitisation deals.

However, bad loans on Italian bank balance sheets fell to their lowest level in about six years in September, central bank data showed on Friday.

Intesa Sanpaolo and Unicredit declined to comment, while the other banks were not immediately available for comment.